A Conversation with FCC Chairman

Ajit Pai

The American Cable Association held its 24th annual summit, themed “Navigating a Sea of Change,” in Washington, D.C., March 28th-30th of this year. The confab’s FCC Keynote featured Federal Communications Commission Chairman Ajit Pai, who was named to the post in January by President Donald Trump. Pai previously served as an FCC Commissioner, appointed by then-President Barak Obama and confirmed unanimously by the Senate in May of 2012.

Pai’s bio on the FCC web site notes that he graduated with honors from Harvard University in 1994 and from the University of Chicago Law School in 1997, where he was an editor of the University of Chicago Law Review and won the Thomas R. Mulroy Prize. In 2010, Pai was one of 55 individuals nationwide chosen for the 2011 Marshall Memorial Fellowship, a leadership development initiative of the German Marshall Fund of the United States. The son of immigrants from India, Chairman Pai grew up in Parsons, Kansas. He now lives in Arlington, Virginia, with his wife and two children.

American Cable Association President and CEO, Matt Polka, spent time on the road about two weeks prior to the ACA summit with Chairman Pai and some of the Association’s members from the Armstrong Group, visiting local systems and headend facilities. Polka and Pai sat down during the ACA summit’s FCC Keynote session and had the following discussion.

MP: First question, a very broad one: How’s it been for you and how’s it going now?

AP: It’s been a privilege to work at the FCC these many years. But, especially now, I have a chance to lead the agency [and support] an agenda that’s proactive, responsive to consumer welfare, and will help the industry have the maximum incentive to invest and to innovate. It’s an exciting time to be in the communications regulatory space. And I daresay for those of you in the industry, too, you’re doing this work. As President Kennedy said in the moonshot speech, “Not because it is easy, because it’s hard,” and I personally recognize that it’s hard. I want to make sure that we enable [operators] to do what you do best, which is building digital opportunity for Americans across this country.

MP: You said to your team at the FCC that your goal is to close the digital divide, but to do so, you have to work with private networks and consumers.

AP: The times have definitely changed and you’ve got leadership at the FCC and elsewhere at the agency and throughout Washington that recognizes that the challenge of our time is building a digital infrastructure across this country. I personally recognize that it’s not easy to do as I’ve said for many years, these risks don’t have to be taken, the capital doesn’t have to be spent, the crews don’t have to be hired. We want to make sure you take that massive business decision to build out in all these areas. We don’t view you as an enemy, but rather somebody who we can work with to better enable our citizens to enjoy digital opportunity. We want to make sure that we have a regulatory framework that is good for consumers.

MP: What can we expect you to tackle in the short-term while you’re in this initial sprint of activity?

AP: A number of things. Infrastructure investment, of course, is the number one priority. We’re taking a look at all the regulations on the books and trying to figure out if any of them are holding back innovation and investment. If they are, we want to look at revising them or repealing them; we’ve done some of that as you might have seen.

Additionally, in terms of being proactive, we have a pretty aggressive agenda. One of the first things we did, for instance, was to work with Governor Cuomo, Senator Schumer, and Congressman Collins to deliver $170 million dollars to unserved [areas] of New York state in part to help cable companies and others build out to some of these unserved areas. And that was the very first vote under my chairmanship, and I wanted it to send a signal that broadband is not a Republican issue, not a Democrat issue, it’s an American issue. And I’m committed to working together aggressively with everybody who’s interested [in making] that happen.

MP: Tell us a little bit about the road tour — what you had the chance to learn while you were out in Armstrong’s systems and whether we expect to see Chairman Pai on the road for a good part of your tenure.

AP: To me, that’s the best part of the job. While I love being in Washington thinking about issues and speaking with people, getting on the road and seeing things firsthand is an incredible experience. Being out in a cable headend and seeing all of the servers and how connections are made to [consumers] is an incredible experience; I’ve really enjoyed it.

I know some people prefer to focus on places like Silicon Valley and New York. I prefer cities like Pittsburgh and Youngstown and Cleveland and Detroit, which is where I was a couple of weeks ago. And to be able to hear from operators how hard it is to build [their] networks. To hear from entrepreneurs who are building businesses based on those networks and creating jobs in places that you wouldn’t expect — it’s incredible and it really infuses me with a sense of hope about the future and a motivation to want to do what we can at the FCC to aid that mission. Just to give you one example, [while] I was in Youngstown I met a guy who was very interested in virtual reality gaming. And he didn’t want to move to Silicon Valley or to the east coast. So, he set up shop in Youngstown and now has a business which is one of leading businesses in the United States for virtual reality gaming. It requires a lot of bandwidth. His broadband provider is doing a great job supplying it in Youngstown. But, it’s amazing now to see that in [the past] he wouldn’t have been able to do what he’s doing unless he moved or just found something else to do. Because of broadband, because of the efforts of people like you, he’s able to thrive and that’s a really interesting thing for a regulator to hear and to take back to Washington.

MP: What do you expect to do that at the Commission in terms of infrastructure deployment issues in general and how can we keep that aspect of overbuilding or maybe waste, fraud, and abuse — how can we create accountability there?

AP: That’s a great question, and [there are] a lot of pieces to the answer. First and foremost, we want to make sure that cable has a chance to compete. That’s why, when I set up the Connect America Fund II proposal and [shared it with] my colleagues, I wanted to make sure that small cable companies had a chance to participate in the auction. And I would hope and encourage you — if you haven’t already — to take a look at the order that we got across the finish line on February 23rd. We do hope that you will compete in the auction that is to come because we think that every technology [provider] should have a fair and full chance to participate in that auction.

Another piece of it is working with members of Congress. I’ve been pretty outspoken about the proposal I put on the table last September in Cincinnati for what I called “Gigabit Opportunity Zones” and I purposely introduced this before the election because I didn’t want it to be sort of a partisan blueprint. I think this is a bipartisan blueprint for digital infrastructure deployment that should appeal to everybody. And the idea here is pretty simple — you take a geographic area as small as an urban block or as big as a rural county and so long as 75% of the income of the people in that area is 75% or less of the national median, you could get tax incentives for building out further in those areas. In addition, we’d relieve the payroll side taxes for employers who set up businesses in those areas and we would encourage states and localities to streamline broadband deployment. I’m hopeful that if Congress tackles an infrastructure plan, they’ll think about this idea. And I especially think that small cable companies have a potentially great role in participating in this sort of program.

Now, the other piece you asked [about] was overbuilding. This is something I think is really important. One of the things I circulated [with] my colleagues is an order that would revise the condition on the Charter merger which required them to overbuild approximately one million locations where ACA members have already built. And to me, it’s pretty simple. It’s sort of as if the FCC took two people to a restaurant and said to one person, “Okay, you’re going to get two entrees,” and to the other person, “Well, you’re just going to have to go without,” you know — make do with the bread that’s on the table. To me, that’s essentially what the overbuilding condition does. It says, “To those that already have digital connections, you’re going to have another option — overbuilding.” Whereas everybody else is left on the wrong side of the digital divide. It actually accentuates the digital divide.

And so, we want to take a hard look at that and hopefully if my colleagues see it the same way, we’ll revise that condition. Because the last thing we want to do is penalize you for the investments you’ve already made and dis-incentivize you from doing it in the future. And so, we’d rather get everybody online as opposed to a select few.

MP: Our members continue to see rising costs, the impact of bundling, even retransmission consent as a drag on their broadband investment. What are your thoughts on video in general and about where you might see the FCC playing a role to examine the marketplace and to look at some ways to preventing some of these problems from getting worse?

AP: [At the Commission] we have a number of proceedings that teed up some of these issues. For example, the independent programming proceedings were teasing out some of the questions that will hopefully give us a better sense of what’s going on in the marketplace. And more generally, we want to stay abreast of what is happening in the marketplace. At this point, we’re trying to figure out the appropriate role for the FCC in this space going forward.

MP: Let’s talk about deregulation — sort of clearing the regulatory underbrush. Tell us a little bit about your philosophy as you now begin to engage as Chairman — what you can do to help streamline things as well as to look at something we’ve talked about with you before: to really do a perfect Regulatory Flexibility Act review of impact of regulations on small business.

AP: I’ll start with the last part first. When I was a lawyer in the General Counsel’s office, we would have to review the Regulatory Flexibility Act analyses and they very much struck me as this sort of “check the box” exercise, “Okay, we have to put it in there, let’s just throw in some boilerplate and call it a day.” But to me, that’s sort of the fundamental role of the agency. If you’re going to establish a regulation or enforce a regulation, let’s try to make sure we understand what the actual burden is on the people who are being regulated. Now that I have a chance to lead the agency, one of the things we’ve been doing is taking a look at all the rules that are on the books and figuring out whether they remain necessary in the public interest and the interest of competition, and to make a really clear assessment about what the burden is on people. Over the past couple of months we’ve gotten rid of some the regulatory requirements that simply aren’t necessary anymore. [During] the very first the meeting that I led, for example, we [eliminated] the requirement that cable companies put headend information on the Internet.

The next month, we got rid of some regulatory requirements that were just amazing. We asked our staff, “Okay, all these companies — hundreds of them if not thousands — are submitting this information, spending [a lot of] time on it, having to hire lawyers and accountants to compile it. When was the last time you actually used this information?” And we got the answer, “Well, not within living memory, certainly not within the last five years.” And so, I said, “We’re actually making the private sector do paperwork that sits on a shelf. It doesn’t inform our decisions, doesn’t make anyone better off. Let’s get rid of that regulation.”

There’s going to be more of that to come because, to me, regulatory inertia is one of the most powerful forces out there. You have a rule that sits on the books and the rule might have been worthwhile back in the ’60s or ’70s when it was adopted. We have to remember these rules have to match the marketplace that we’re in. We have to make sure that the public interest today is served by some of these paperwork and other requirements. If they’re not, who does it benefit to maintain them? That’s what I meant when I’ve said we really do have an open door, because if there’s some rule like that on the books that makes you divert money away from building broadband and toward spending money on the bar — and I’m a lawyer by training, don’t hold it against me. I love my legal brethren, but that is not what creates value for the American consumer. It’s building digital connections that does. We’re going to be really aggressive on that front.

MP: What are we going to do about Title II?

AP: I favor a free and open Internet and I oppose the imposition of heavy-handed economic regulations that were inspired by Ma Bell during the Great Depression. To me, it’s a basic question of preserving two core values: on the one hand, we want every consumer to have access to lawful content [and] to have that open Internet experience. And on the other hand, we recognize that the networks of the future are going to require massive capital expenditures and we want to make sure that there’s an incentive to invest, to innovate within those networks. I think there’s a way to achieve both of those goals, which is the Clinton Administration framework of light touch regulation: let the marketplace develop. If there is a particular actor or actors that are behaving in any [anti-]competitive way, then the government can always take targeted action to address that issue.

But, to preemptively declare every company from the big cable companies all the way down to Main Street Broadband — an ISP in Cannon Falls, Minnesota with four customers — to declare them an anti-competitive monopolist from the get-go and regulate them as such seems to me to be an overreach. I think the public [should] know going forward that we want the Internet — in the United States — to be the envy of the world. We want our digital economy to continue to thrive.

When I was in Zelienople I loved seeing all the facilities. One of the things I found most instructive was seeing maps that detail where Armstrong is providing service. Those are parts of the country that are easily overlooked.

They don’t make the front pages of the national newspapers, but [they] are communities in Western Pennsylvania and Eastern Ohio where my in-laws are, and in Kentucky, in upstate New York. These are places that don’t have to be served. The networks don’t have to be built as I said earlier. We want to make sure that the folks who are taking the risks — people in this room — [can] build out to those areas.

We want to make sure that sort of thing is encouraged in the future. To me, it’s not the question of just targeting certain industries or regulating for the sake of regulating. The end goal is always the public interest; we’re all in this together. Let’s establish a regulatory framework that’s flexible, that protects consumers, and protects the incentive to invest. All of us are going to be better off if we do that.